The Australian dollar has moved higher in early Asian trade on Monday, boosted by opinion polling in the UK suggesting a lesser chance that the nation will vote to leave the European Union on Thursday and further strength in Chinese housing data released over the weekend.
“Markets being what they are, last Thursday’s tragic news of the slaying of UK MP Jo Cox, campaigning on behalf of the ‘remain’ side in front of Thursday’s EU referendum, elicited a strong positive response in all things Sterling, as well as supporting risk sentiment more broadly,” said Ray Attrill, global co-head of FX strategy at the NAB.
“This was on the view that the tragedy could have a material influence in swaying opinion amongst UK voters back in favour of staying in the EU.
“This snap judgement by markets received some validation in a ComRes poll for the Sunday Mirror published on Saturday night, and which was being conducted at precisely the time news of Jo Cox’s murder hit the news headlines. Before the news, 45% of those polled said they would be ‘delighted’ if the UK voted to leave the EU.
“This dropped to 38% of respondents polled after the news, while the Remain camp got a nine point boost from those saying they would be ‘delighted’ if Britain stayed.”
Attrill suggests that the poll “will resonate today”, likely helping to underpin risk assets, including the Australian dollar.
Further assisting the Aussie’s advance, Chinese new home price data for May released on Saturday revealed that prices rose by 6.9% compared to a year earlier, higher than the 6.2% increase reported in the year to April.
“50 of the 70 major cities reported prices gain last month versus 46 in April,” says Attrill. “A NBS spokesman said that the average growth of new homes in first-tier cities started to narrow, while it continued to widen in second and third tier cities.”
As a result, the AUD/USD shot out of the blocks in Asian trade this morning, rising to as high as .7439 before easing in recent trade. It currently fetches .7423.
With economic calendar thin on Monday, keeping with the trend for the entire week, Attrill suggests that the UK EU referendum on Thursday will dominate movements in the Aussie in the days ahead.
“This week is all about Thursday’s UK referendum and where the results are likely to start trickling in from about 9:30 AEST on Friday with the outcome expected to be know sometime during the Australian afternoon,” he says.
“Internationally and ahead of Thursday, Fed Chair Yellen testifies to the Senate banking Committee on Tuesday, but it’s doubtful we’ll learn more than we did last Wednesday.
“Here, it’s RBA Board minutes while the RBA’s Debelle, Heath and Ellis are all due to pop up during the week.”